LONDON (Reuters Breakingviews) - French President Emmanuel Macron’s reformist credentials are on the line. The former Rothschild investment banker on Friday reshuffled his government, the first step in what he has previously flagged would be a reinvention of his presidency. He may be willing to ditch more than his prime minister in his bid to win re-election in 2022.
The departure of Prime Minister Edouard Philippe grew more likely after Macron’s La Republique En Marche party performed poorly in the June 28 local elections that saw a resurgence in support for left-leaning groups, particularly the Greens. As a conservative among Macron’s mostly centrist allies, Philippe may have been a potential hindrance to new plans to ramp up state spending. His replacement, Jean Castex, hails from the more interventionist, socially minded wing of France’s centre-right, according to an official quoted by Reuters.
When Philippe was appointed in 2017, Macron was promising to control budget deficits and rollback state intervention in the economy. Covid-19 means those pledges are being ripped up. Privatisations of state-backed companies have effectively been frozen and extra spending to mitigate the economic damage of lockdown could, according to the government’s forecasts, push public debt up around 121% of GDP by the end of the year from 98% last year.
France’s pandemic relief spending so far amounts to nearly 21% of GDP, compared with 47% in Germany according to BNP Paribas research. Macron is expected to close that gap by extending more help to business, especially the automotive, aerospace and tourist industries, and by ploughing money into green projects. That may not be enough to revive his flagging poll ratings.
If so, he may also be tempted to drop or defer pension reform plans until after the 2022 presidential elections. Rolling back an unpopular - albeit cornerstone - policy like raising the retirement age would help Macron win support from trade unions and workers at a time of national division. It would also undermine what remains of his reformist credibility.
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